Cartilage contains an extensive extracellular matrix and provides mechanical strength to help resist compression in joints. Cartilage also serves as the template for growth and development of most bones. ECM molecules such as perlecan, link protein, aggrecan, and type II collagen are expressed during chondrocyte differentiation. Mutations of these genes and regulatory factors result in impaired cartilage formation and malformation of the limbs, craniofacial bones, and appendicular skeleton. Cartilage formation is initiated by mesenchymal cell condensation to form primordial cartilage and is followed by chondrocyte differentiation, which includes resting, proliferative, prehypertrophic, and hypertrophic chondrocytes. As the final step in endochondral bone formation, hypertrophic cartilage is invaded by blood vessels and osteoblasts, and the calcified cartilage is subsequently replaced by bone. Thus, spatial and temporal regulation of chondrocyte differentiation is essential in determining the length and width of skeletal components. We previously reported that the transcription factor epiprofin (Epfn/Sp6) is essential for tooth morphogenesis, hair follicles, and normal digit formation. In collaboration with Dr. Maria Ros, we studied the role of Epfn in digit formation using mouse models. The apical ectodermal ridge (AER) functions as a signaling center for limb development, and the formation and maintenance of the AER is critical for the outgrowth and patterning of the vertebrate limb. The establishment of the AER is directed by complex interactions between the FGF, WNT/&#946;-catenin and BMP signaling pathways that operate within the ectoderm, as well as between the ectoderm and mesoderm components of the early limb bud. This process is also linked to the initiation of the limb bud and the establishment of dorsoventral (DV) patterning. Epfn is transiently expressed in the limb ectoderm and in the AER during limb development. Epfn deficiency resulted in a defective autopod with mesoaxial syndactyly in the forelimb, and synostosis (bone fusion) in the hindlimb with partial bidorsal digital tips. We found that Epfn mutant mice display a defect in AER maturation, which appears flat and broad with a double-ridge phenotype. Using genetic analysis, we showed that Epfn is a target of WNT/&#946;-catenin signaling in the limb ectoderm and that its expression is independent of FGF signaling. We have identified that pannexin 3 (Panx3) is highly expressed in developing cartilage. Panx3 is a new member of the pannexin gap junction family of proteins, and was originally identified through a GenBank database search. In vertebrates, gap junction proteins comprise more than 20 members of the connexin superfamily and 3 members of the pannexin family. Gap junctions regulate cell morphology and physiology and are implicated in cell proliferation and differentiation. Gap junctions exert their actions by allowing the exchange of small molecules such as ions, as well as low molecular weight metabolites and other messenger molecules, between adjacent cells (via gap junctions) and between cells and extracellular space (via hemichannels). Many of the growth factors and transcription factors involved in cartilage development have been identified. However, the regulatory mechanisms that control the switch from proliferation to differentiation, or that maintain the differentiated state, are still unclear. We hypothesized that Panx3 may play a role in this switch during chondrocyte differentiation. We also demonstrated that Panx3 is strongly expressed in the prehypertrophic zone of the growth plate, where chondrocytes stop proliferation and differentiate into hypertrophic chondrocytes. Panx3 was induced during differentiation of the chondrogenic cell line ATDC5. Overexpression of Panx3 promoted ATDC4 cell differentiation, while suppression of endogenous Panx3 expression by shRNA inhibited that differentiation. We found that Panx3 inhibited parathyroid hormone (PTH)-mediated ATDC5 cell proliferation. In addition, Panx3 promoted the release of ATP from ATDC5 cells to the extracellular space through its hemichannel activity, and this ATP release was inhibited by an antibody to the extracellular domain of Panx3. We also found that Panx3 expression reduced intracellular cAMP levels, as well as the activation of CREB, a PKA downstream effector, which activates the genes necessary for proliferation. Our results suggest that Panx3 functions to switch chondrocyte cell fate from proliferation to differentiation by regulating intracellular ATP/cAMP levels. This in turn counteracts the PTH/PTHrP signal pathway.